Advertisement

Advertisement

The company investing its way to zero emission transport

It's time to accelerate the transition to pollution-free roads, says Simon Pickett of Octopus Group

Octopus Group’s Simon Pickett

ADVERTISING FEATURE

THE figures speak for themselves. Every year, 40,000 people in the UK have their lives cut short by air pollution, according to the Royal College of Physicians and the Royal College of Paediatrics and Child Health, both based in London.

A significant amount of that pollution comes from cars, buses and lorries: even the cleanest engines contribute to the build-up of dangerous nitrogen oxides and the fog of tiny particles that cause lung damage. It’s small wonder that the capital – where some pollutants are at twice the safe concentration recommended by the World Health Organization – is imposing new restrictions on transport.

As well as the long-established congestion charge, there is now a T-charge operating in London. This requires older, more polluting vehicles to pay £10 per day to enter the city centre. Soon this will be supplemented by a charge to enter an area known as the Ultra Low Emission Zone (ULEZ), applicable to all vehicles except those that meet stringent emissions standards.

Advertisement

“We could end up with 20 million private batteries on people’s driveways”

Such measures – and similar ones around the world – are not just altering the habits of individual drivers. They are also changing the economics of the entire transport industry. “Transport is at an inflection point,” says Simon Pickett of Octopus.

A major part of the anticipated change lies in the introduction of zero-emission vehicles that could help significantly reduce carbon emissions and air pollution. But implementation is not straightforward. “There are two big obstacles: capital and infrastructure complexity,” Pickett says.

A zero-emission-capable taxi is likely to cost around £60,000, hardly a casual outlay for an individual or even a small company. An electric bus can cost two or three times as much as a diesel bus.

However, there is reason for optimism here. According to a study released by Bloomberg New Energy Finance (BNEF) earlier this year, the high upfront cost of an electric bus is offset by lower fuel and maintenance costs. BNEF projects even better savings by 2026, when lower battery prices could make the upfront cost of an electric bus comparable with that of an equivalent diesel version.

With vans, the story is even more compelling. “By year five you’re cost neutral,” Pickett says. “And as soon as you start factoring in congestion charges and the Ultra Low Emission Zone, you’re talking about material savings versus older combustion technology.”

Then there’s the issue of infrastructure complexity. Traditional combustion engines benefit from an established, cost-conscious fuelling and maintenance network and from decades of experience. Introducing electric vehicles requires analysis, investment in vehicle charging equipment and upgrades to grid infrastructure. So a bus operator looking to replace half its fleet with electric vehicles has a lot to consider. “Businesses and traditional financiers are used to spending their capital on vehicles, but it’s a big ask when it includes extra complexity and costs for non-vehicle assets,” Pickett says.

“Air pollution has to go. And whether you care about the planet or your wallet, this makes sense”

– Simon Pickett, Octopus

Octopus has a solution for this problem – recasting it as an investment opportunity that delivers electric-powered transport as a full service. The company offers capital for upfront investment in vehicles, together with the charging equipment and any reinforcement required to the grid infrastructure. “The result is a total package, a real turnkey solution,” Pickett says. “We’re working with operators to finance all the pieces of the puzzle, and we’ll wrap that up and charge it to the operator as a pay-as-you-use service that helps businesses optimise operational cash flow.”

Hidden benefits

There’s a hidden added benefit too, as Pickett explains. “Electric-powered vehicles could become smart resources for the national energy grid – a grid that is moving rapidly in the direction of the ‘three Ds’ – decarbonised, decentralised, and digitalised.” One of the issues with our shift towards this smart clean future is variability: the output from solar and wind farms varies, given the fact that the sun isn’t always shining and the wind isn’t always blowing where they are. And as Pickett says, “Flexibility will be important in the future energy market, because it allows you to control energy consumption and build a more efficient, clean energy system.”

Smart technology can ensure that vehicles are charged at times when renewables are providing cheap, plentiful electricity. And cutting-edge vehicle-to-grid technology means that fleet owners could be paid to feed some of that stored power back into the grid when shortfalls in solar and wind energy coincide with the vehicles not being in use. Right now, there are thousands of vehicles that aren’t always active but could help with energy redistribution. “Flexibility across whole fleets of vehicles is the key to making clean power generation viable,” says Pickett.

Commercial vehicle fleets could include those of supermarkets offering home deliveries, logistics firms such as DHL or FedEx, and infrastructure companies such as telecoms and utilities providers. But the electric vehicle vision is much bigger, as Pickett points out. “One day, every domestically owned vehicle will be part of the solution too. We could end up with 20 million private batteries in people’s driveways, providing stability to the grid – and that’s hugely exciting.”

“Octopus has a solution to this problem: recast it as an investment opportunity”

This won’t be an overnight revolution. The government has shown strong leadership, Pickett says, creating taxed emissions zones and legislative pressure to reduce pollution, forcing manufacturers to phase out production of diesel and petrol engines.

Challenges aside, everything is in place for a new era in transport to start right now. Pickett believes that once the big players are signed up, the transition to clean vehicles will only accelerate. When people start seeing buses, delivery vehicles and black cabs going fully electric, that sends a message, Pickett says. “It will have a strong effect on all the other vehicle-buyers, including the private market.”

Pickett is excited about the inevitability of this clean-air future. “It’s a huge step forward that we can now make the economics work.”

Will transport in London be fully electric in 10 years? “I would hope so,” Pickett says. “Air pollution has to go. Whether you care about the planet or your wallet, this makes sense.” He compares it to the ban on smoking on aeroplanes. “We are 64 times more likely to die of a pollution-related illness in London than in Sweden. One day, we’ll wonder how we ever tolerated this.”